Industrial production increased 0.8 percent in December after gains of 0.2 percent in
November and 0.8 percent in October. In the manufacturing sector, output rose 0.7 percent in
December, and increases occurred in most major industry groups. The output of utilities jumped
2.7 percent, and the output at mines advanced 0.4 percent. Over the twelve months ending in
December, total industrial production increased 4.4 percent, to a level that is 117.8 percent of its
1997 average, while total industrial capacity expanded a modest 1.2 percent. The rate of
capacity utilization in December, at 79.2 percent, was 2.4 percentage points above its
year-earlier level but still 1.9 percentage points below its 1972-2003 average.

r Revised. p Preliminary.
The statistics in this release cover output, capacity, and capacity utilization in the
industrial sector, which the Federal Reserve defines as manufacturing, mining, and electric and
gas utilities. Manufacturing comprises those industries included in the North American Industry
Classification System, or NAICS, manufacturing plus the logging and newspaper, periodical,
book and directory publishing industries that have traditionally been considered manufacturing and included
in the industrial sector.

Market Groups

The output of consumer goods rose 0.7 percent in December and increased at an annual
rate of 4.4 percent for the fourth quarter as a whole. In December, the index for consumer
nondurables increased 0.8 percent and received a significant boost from the output of consumer
energy products, which jumped 2.9 percent in December largely because of an increase in
residential sales of electricity. Among non-energy nondurables, the index for paper products
rose 1.2 percent while the indexes for clothing and for foods and tobacco moved up by smaller
amounts; these gains more than offset a second monthly decline in the index for chemical
products. The output of consumer durables rose 0.6 percent, as the index for automotive
products turned back up and the indexes for appliances, furniture, and carpeting and for
miscellaneous goods increased. The output of home electronics tumbled again and ended the
year nearly 8-1/2 percent below its level in December 2003.

The production of business equipment increased 0.9 percent in December and was nearly
10 percent above its year-earlier level; for the fourth quarter as a whole, this index rose at an
annual rate of 5.9 percent. The output of information processing equipment added another 1.0
percent in December, the fourth month of similarly sized gains. Industrial and other equipment
rose 1.3 percent; however, average output in the fourth quarter was little changed after having
risen sharply over the previous four quarters. The production of defense and space equipment
continued to climb in December, reaching a level 9.0 percent higher than a year earlier.

In December, nonindustrial supplies posted its largest one-month gain--0.9 percent--since
February, mainly because of a jump of 1.1 percent in the output of business supplies. The index
for materials also rose 0.9 percent; the rise in output in this category was supported both by a 1.3
percent gain for energy materials and by broad-based gains among durable and nondurable
materials categories.

Industry Groups

Manufacturing production increased 0.7 percent in December, and the factory operating
rate moved up 0.4 percentage point, to 77.8 percent, the highest rate of utilization since
December 2000. Nonetheless, the factory operating rate was still more than 2 percentage points
below its 1972-2003 average. In December, the production of durable goods increased 0.9
percent. The largest gain among the durable goods industries was in primary metals, in which
output rose 3.0 percent. The production of computer and electronic products registered a 1.2
percent gain, and its level was 16.4 percent higher than a year earlier. Among the selected
high-technology industries, the output of computer and peripheral equipment continued to
expand at a monthly pace of about 1-1/2 percent; increases in the production of semiconductor
and related electronic components strengthened for a second month in December after
decelerating, on balance, over the previous eight months. The indexes for most other major
categories of durable goods increased in December; the exceptions include wood products,
which moved down for a second month, and electrical equipment, appliances, and components,
which turned back down. The production of nondurable goods, which rose 0.3 percent, included
output gains of at least 1 percent for textile and product mills, paper, and petroleum and coal
products. Smaller production increases were posted in food, beverage, and tobacco products;
apparel and leather; and printing and support. The production of chemicals edged down, and the
output of plastics and rubber products was unchanged. Production in the non-NAICS
manufacturing industries (logging and publishing) jumped 1.2 percent.

In December, the higher level of utilities output reflected a 3.0 percent increase in the
output of electric utilities and a 1.3 percent rise in the output of natural gas utilities. The small
gain in mining output was primarily the result of increases in crude oil extraction and coal
mining. Capacity utilization for industries in the crude stage of processing rose 0.6 percentage
point, to 86.4 percent, a rate that is equal to its 1972-2003 average. The operating rate for
industries in the primary and semifinished stages increased 0.8 percentage point, to 80.6 percent,
and the utilization rate for finished goods producers increased 0.4 percentage point, to 76.1
percent.